Other figures signal demand is improving. Purchases of new homes, logged when contracts are signed, rose more than forecast in July to match a two-year high, Commerce Department data showed. Previously owned house sales rebounded from an eight- month low, the Realtors group reported.
Property values are also recovering. The S&P/Case-Shiller index of home prices in 20 cities climbed in June from a year earlier, the first gain since September 2010, a report from the group showed yesterday. Nationally, prices jumped in the second quarter by the most in more than six years.
Companies in related industries are benefiting from the pickup. Home Depot Inc., the largest U.S. home-improvement retailer, reported second-quarter profit that topped analysts’ estimates and raised its forecast for earnings this year as customers spent more on remodeling projects.
There are “signs of gradual improvement within the overall housing market,” Chief Executive Officer Frank Blake said on a conference call with analysts Aug. 14.
At the same time, foreclosures remain a risk, albeit one that is easing. Distressed sales accounted for 24 percent of existing-home purchases in July, the Realtors data last week showed. That’s less than the prior month and down from 29 percent in July 2011. Such sales are comprised of foreclosures and short sales, in which the lender agrees to a transaction for less than the balance of the mortgage.
Borrowing costs are also attractive. The average rate on a 30-year fixed mortgage dropped to 3.49 percent in the week ended July 26, the lowest in records dating to 1971, according to McLean, Virginia-based Freddie Mac. It was 3.66 percent last week.